Question 1

The theory of consumer choice provides the foundation for understanding the

Accepted Answer

A) structure of a firm. 
B) profitability of a firm. 
C) demand for a firm's product. 
D) supply of a firm's product. 
A) structure of a firm. 
B) profitability of a firm. 
C) demand for a firm's product. 
D) supply of a firm's product.

Question 2

Figure 21-14      
-Refer to Figure 21-14. Which of the graphs illustrates indifference curves for which the marginal rate of substitution is undefined?

Accepted Answer

A) graph a 
B) graph b 
C) graph c 
D) All of the above are correct. 
A) graph a 
B) graph b 
C) graph c 
D) All of the above are correct.

Question 3

Figure 21-3
In each case, the budget constraint moves from BC-1 to BC-2.        
-Refer to Figure 21-3. Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods?
(i)graph a
(ii)graph b
(iii)graph c
(iv)graph d

Accepted Answer

A) (i) only 
B) (iv) only 
C) (ii) or (iii) only 
D) None of the above is correct. 
A) (i) only 
B) (iv) only 
C) (ii) or (iii) only 
D) None of the above is correct.

Question 4

Janet prefers cashews to almonds. She prefers macadamia nuts to peanuts, but she is indifferent between almonds and peanuts. Which of the following statements can we say for sure?

Accepted Answer

A) Janet prefers cashews to macadamia nuts. 
B) Janet prefers peanuts to cashews. 
C) Janet prefers macadamia nuts to almonds. 
D) Janet prefers almonds to macadamia nuts. 
A) Janet prefers cashews to macadamia nuts. 
B) Janet prefers peanuts to cashews. 
C) Janet prefers macadamia nuts to almonds. 
D) Janet prefers almonds to macadamia nuts.

Question 5

Figure 21-6  
-Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of Mt. Dew is $2, and the value of A is 200. What is the price of popcorn?

Accepted Answer

A) $0.50 
B) $1 
C) $2 
D) $4 
A) $0.50 
B) $1 
C) $2 
D) $4

Question 6

If income increases and prices are unchanged, the consumer's budget constraint

Accepted Answer

A) remains the same. 
B) shifts outward. 
C) shifts inward. 
D) rotates outward along the horizontal axis. 
A) remains the same. 
B) shifts outward. 
C) shifts inward. 
D) rotates outward along the horizontal axis.

Question 7

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

Accepted Answer

bowed inwa

Question 8

Figure 21-19  
-Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $4. The consumer's optimal choice is point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 9

Figure 21-18  
-Refer to Figure 21-18. Bundle D represents a point where

Accepted Answer

A) MRSxy > Py/Px. 
B) MRSxy = Px/Py. 
C) MRSxy x/Py. 
D) MRSxy y/Px. 
A) MRSxy > Py/Px. 
B) MRSxy = Px/Py. 
C) MRSxy x/Py. 
D) MRSxy y/Px.

Question 10

Answer the following questions based on the table. A consumer is able to consume the following bundles of rice and beans when the price of rice is $2 and the price of beans is $3.
 
a.How much is this consumer's income?
b.Draw a budget constraint given this information. Label it B.
c.Construct a new budget constraint showing the change if the price of rice falls $1. Label this C.
d.Given the original prices for rice ($2) and beans ($3), construct a new budget constraint if this consumer's income increased to $48. Label this D.

Accepted Answer

The answer of Answer the following questions based on the...

Question 11

The income effect of an increase in the interest rate will result in an increase in​ consumption when

Accepted Answer

A) young and an increase in savings when young. 
B) ​old and an increase in savings when young. 
C) young and a decrease in savings when young.​ 
D) ​old and an increase in savings when old. 
A) young and an increase in savings when young. 
B) ​old and an increase in savings when young. 
C) young and a decrease in savings when young.​ 
D) ​old and an increase in savings when old.

Question 12

If a consumer experiences a decrease in income, the new budget constraint will have the same slope as the old budget constraint.

Accepted Answer

A) True 
 B)False

Question 13

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin.  
-Refer to Figure 21-31. Suppose Kevin is optimally purchasing 12 shirts and 28 sweaters, and he is spending $648 on shirts. What is the price of a sweater?

Accepted Answer

Given that Kevin is optimally purchasing

Question 14

A consumer's indifference curves are straight lines when, for the consumer, the goods in question are __________.

Accepted Answer

The answer of A consumer's indifference curves are straight lines...

Question 15

Bundle J contains 10 units of good X and 5 units of good Y. Bundle K contains 5 units of good X and 10 units of good Y. Bundle L contains 10 units of good X and 10 units of good Y. Assume that the consumer's preferences satisfy the four properties of indifference curves. The price of X is $1, the price of Y is $2, and the consumer has an income of $20. Which bundle will the consumer choose?

Accepted Answer

A) bundle J 
B) bundle K 
C) bundle L 
D) either bundle J or bundle K 
A) bundle J 
B) bundle K 
C) bundle L 
D) either bundle J or bundle K

Question 16

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Accepted Answer

A) is equal to the relative price ratio of the goods. 
B) exceeds the marginal utility of each good by the greatest amount. 
C) is less than the slope of the budget constraint. 
D) All of the above are correct. 
A) is equal to the relative price ratio of the goods. 
B) exceeds the marginal utility of each good by the greatest amount. 
C) is less than the slope of the budget constraint. 
D) All of the above are correct.

Question 17

Hold the prices of goods, as well as Amy's preferences, constant. If Amy's income increases, then

Accepted Answer

A) both her indifference curves and budget constraint change. 
B) her indifference curves change, but her budget constraint does not change. 
C) her budget constraint changes, but her indifference curves do not change. 
D) neither her indifference curves nor her budget constraint change. 
A) both her indifference curves and budget constraint change. 
B) her indifference curves change, but her budget constraint does not change. 
C) her budget constraint changes, but her indifference curves do not change. 
D) neither her indifference curves nor her budget constraint change.

Question 18

For Brent, the income effect of a wage increase is stronger than the substitution effect. In response to a wage increase, will Brent work more hours or will he work fewer hours?

Accepted Answer

In response to a wag

Question 19

The theory of consumer choice most closely examines which of the following Ten Principles of Economics?

Accepted Answer

A) People face trade-offs. 
B) Governments can sometimes improve market outcomes. 
C) Trade can make everyone better off. 
D) Markets are usually a good way to organize economic activity. 
A) People face trade-offs. 
B) Governments can sometimes improve market outcomes. 
C) Trade can make everyone better off. 
D) Markets are usually a good way to organize economic activity.

Question 20

The following diagram shows two budget lines: A and B.   Which of the following could explain the change in the budget line from A to B?

Accepted Answer

A) a decrease in the price of X 
B) an increase in the price of Y 
C) a decrease in the price of Y 
D) More than one of the above could explain this change. 
A) a decrease in the price of X 
B) an increase in the price of Y 
C) a decrease in the price of Y 
D) More than one of the above could explain this change.

Exam 21: The Theory of Consumer Choice

The theory of consumer choice provides the foundation for understanding the

Figure 21-14 -Refer to Figure 21-14. Which of the graphs illustrates indifference curves for which the marginal rate of substitution is undefined?

Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3. Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods? (i)graph a (ii)graph b (iii)graph c (iv)graph d

Janet prefers cashews to almonds. She prefers macadamia nuts to peanuts, but she is indifferent between almonds and peanuts. Which of the following statements can we say for sure?

Figure 21-6 -Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of Mt. Dew is $2, and the value of A is 200. What is the price of popcorn?

If income increases and prices are unchanged, the consumer's budget constraint

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $4. The consumer's optimal choice is point

Figure 21-18 -Refer to Figure 21-18. Bundle D represents a point where

The income effect of an increase in the interest rate will result in an increase in​ consumption when

If a consumer experiences a decrease in income, the new budget constraint will have the same slope as the old budget constraint.

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. Suppose Kevin is optimally purchasing 12 shirts and 28 sweaters, and he is spending $648 on shirts. What is the price of a sweater?

A consumer's indifference curves are straight lines when, for the consumer, the goods in question are __________.

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Hold the prices of goods, as well as Amy's preferences, constant. If Amy's income increases, then

For Brent, the income effect of a wage increase is stronger than the substitution effect. In response to a wage increase, will Brent work more hours or will he work fewer hours?

The theory of consumer choice most closely examines which of the following Ten Principles of Economics?

The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

The income effect of an increase in the interest rate will result in an increase in consumption when